Financial Daily from THE HINDU group of publications
Thursday, Jan 31, 2002

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MNC moolah for Bollywood masala

Ambarish Mukherjee
Nithya Subramanian

NEW DELHI, Jan. 30

THE face of film financing in the country is set to change with the entry of the US-based Film Finances Inc. One of the largest issuers of `film completion bonds', the company has firmed up plans for an Indian presence.

The arrival of the US multinational, which has decided on the joint venture route to gain a foothold in Bollywood, is expected to enable Indian film producers to access institutional finance easily.

The concept of completion bonds, new to India, is widespread in developed countries as far as financing of films is concerned.

These bonds are usually issued in cases where films are produced through institutional finances, as is the existing practice in countries such as the US, Canada, the UK and Australia.

The bonds ensure that the films are completed in time, since banks maintain that unfinished films have no value.

Film Finances has tied up with Kaleidoscope (India) Private Ltd, which is controlled by Mr Bobby Bedi, co-producer of the controversial Bandit Queen.

The new company, called Film Completion Services Ltd (FCS), will have an authorised capital of only Rs 49 lakh, since the activity is not capital-intensive, but is essentially dependent on human resource quality.

The joint venture will, however, leverage on the US parent's capability to guarantee film projects up to $90 million (Rs 432 crore).

The company also maintains a substantial insurance programme through the London insurance market, underwritten by Lloyds of London and other first-class insurance companies for guarantees in excess of $90 million.

The Indian partner will hold a minority stake of 26 per cent in FCS, with the foreign partner holding the rest.

According to the business plan worked out for the Indian operations, Film Finances will provide financiers of movies, i.e., banks and financial institutions, the assurance that the film will be delivered on time and that over-budget costs will not be the financier's responsibility.

Internationally, all motion pictures guaranteed by the company are insured through the London insurance market.

Financiers of motion pictures guaranteed by Film Finances receive assurances that their investments are covered by Lloyds of London.

The underwriters for films guaranteed by Film Finances take the liability for every dollar spent by the financiers in making of the film. A similar practice would be followed in India as well.

Industry sources said that Film Finances' decision to enter India would encourage banks and financial institutions to fund films.

Officials in these institutions have always maintained that film financing is extremely risky in India, considering the unorganised nature of the business.

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